The Nub

Not since 1997 have central bankers gathering in Jackson Hole, Wyoming been this worried about Asia. No serious economist thinks President Xi Jinping’s economy will get anywhere near this year’s 5.5% growth target. In fact, the 0.4% expansion China eked out in the April-June quarter year-on-year suggests it will be lucky to get even halfway there.

Why Does it Matter

China’s abrupt downshift is as self-inflicted as they come. The biggest, and most immediate, headwind is Xi’s obsession with massive “zero Covid” lockdowns. The policy is wildly out of sync with global efforts to adjust to more transmissible, but less deadly, coronavirus strains. The other is less appreciated: Beijing’s failure to recalibrate the Chinese growth engines when Xi and his team had the chance from 2012 to 2019, before the pandemic hit. Now, as China stumbles, central bankers gathered in Jackson Hole are faced with their biggest Asia-related concerns in 25 years.

What Next

China’s uncertain trajectory is a much bigger problem for today’s global economy than it was in the late 1990s. Back then, China wasn’t the largest trading nation or the generator of some $17 trillion worth of global GDP. Suddenly, Beijing’s go-slow approach to fixing the country’s economic cracks these last 10 years is a clear and present danger to the economies of central bankers jetting into Wyoming this weekend. Along with the People’s Bank of China slashing interest rates, Beijing cut reserve requirements and loosened leverage limits. All initial public offerings were shelved, while regulators halted trading in thousands of listed companies. Average Chinese were allowed to put up apartments as collateral so they could buy shares. Beijing rolled out marketing campaigns to encourage households to support stocks out of patriotism.